SEATTLE — Mortgage payments on a typical home are expected to become affordable in 20 major U.S. metropolitan areas by the end of 2026, the most since 2022, as slower home-price growth, easing mortgage rates and rising incomes improve buying conditions, according to a new forecast from Zillow.
At the national level, a typical mortgage payment currently consumes 32.6% of median household income, the best affordability reading since August 2022, Zillow said. That share is projected to fall to 31.8% by year’s end, moving closer to the widely used benchmark that housing costs should not exceed 30% of income to avoid becoming a financial burden.
“This is what a small-wins year looks like for housing,” Kara Ng, a senior economist at Zillow, said in a statement. “Rising incomes, subdued price growth, and gradually easing mortgage rates would help buyers regain their footing while allowing homeowners to continue building wealth. These types of slow and steady affordability improvements are exactly what the housing market needs over the long run.”
A Change in 2020
According to Zillow, before the pandemic, mortgage payments — including taxes, insurance and maintenance — typically required between 22.5% and 26.5% of median household income, assuming a 20% down payment. That changed sharply after 2020, as home prices surged and mortgage rates doubled in 2022. Affordability hit an all-time low in October 2023, when a typical mortgage consumed 38.2% of median income and only seven of the nation’s 50 largest metros were considered affordable, the report noted.
Zillow’s forecast assumes mortgage rates fall to near 6% by the end of the year, home values rise a modest 1.9%, and incomes grow by about 3.3%, based on Bloomberg consensus estimates. Under that outlook, the typical U.S. home value would end the year at $365,795.
Affordability gains are expected despite continued home-price growth, Zillow said. The company projects that home values will rise in 41 of the 50 largest metropolitan areas, including Chicago, Atlanta and Raleigh. Hartford, Conn,, is the lone major metro where affordability is expected to worsen, as Zillow forecasts it will be the hottest housing market of 2026.
How Forecast Was Determined
The Zillow analysis assumes buyers put 20% down, a hurdle that remains out of reach for many households. The typical U.S. home is currently valued at $359,078, according to the Zillow Home Value Index, requiring a down payment of nearly $71,800. Based on Zillow’s appreciation forecast, that figure would exceed $73,000 by the end of the year. Smaller down payments would raise monthly costs and reduce affordability, Zillow reminded.
Using the average mortgage rate from December of 6.2% and assuming a 20% down payment, the monthly cost for a typical home is $2,337, including principal, interest, taxes and insurance, Zillow said. That is $92 less per month than a year ago and $177 below the peak reached in October 2023. If Zillow’s outlook holds, the monthly payment would rise slightly to about $2,358 by year’s end.
How to Improve Affordability
Zillow said buyers can improve affordability by exploring down payment assistance programs and carefully budgeting before shopping. Its platform allows users to view assistance options tied to specific listings, while its BuyAbility tool tracks mortgage rates to help keep home searches within a set monthly budget.
“Preparation doesn’t just make the process smoother — it can change the outcome,” Ng said in a statement. “Knowing your numbers ahead of time helps buyers compete without overreaching.”
